Alliant companies ready to sound off

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When General Services Administration officials asked for comments on how to make the planned Alliant contract more accessible and useful to midsize businesses, they may not have known what they were getting into.

Midsize contractors are squeezed between small businesses with special advantages and big firms with deep pockets, established infrastructure and long histories with government clients. The firms in the middle are hard-pressed to compete in either direction.

As such, their owners and executives are quick to respond to requests for information such as the one GSA published in February asking for their advice.

“Medium-sized companies are just collapsing,” said Phil Foote, chief operating officer at STG, a midsize systems integrator. “They’re being gobbled up by larger businesses.”

When companies hold small-business incentive and set-aside programs, Foote said, they win business because they have help. But when they outgrow that classification, they are still small compared to industry giants. For many such firms, the most appealing exit strategy is not the initial public offering of stock that signifies a company is strong and ready to continue growing. Instead, their strategy is selling out.

The current plan calls for Alliant, a governmentwide information technology services contract that GSA expects to award to several vendors in 2007, to have a companion contract set aside for small businesses. That’s indicative of the problem, Foote said. The smaller players get a hand with a contract guaranteeing that they will compete only against one another, while companies that are only slightly larger could be going head-to-head with industry behemoths.

Although most midsize firms agree on the problem, a wider spectrum of opinion exists on the solution in regards to Alliant and more broadly.

Break it up
Russell Hall, chief executive officer of Macfadden, a midsize integrator, argued that Alliant shouldn’t exist at all in the form that GSA envisions. Governmentwide acquisition contracts are a form of contract bundling, he said.

Bundling is the aggregation of multiple requirements into a single contract. The practice, generally discouraged in government contracting, takes opportunities that smaller players could compete for individually and combines them into an omnibus contract out of reach of all but the larger firms.

“If you weren’t [a subcontractor] on a team to begin with, you’re probably going to be locked out” of such contracts, Hall said. “For a company that doesn’t have the resources early in the game to identify opportunities and get aligned [with partners], it makes it very, very difficult to grow.”

A company like Macfadden can’t bring a comprehensive offer to the table, but it could compete strongly in some of the services Alliant covers, Hall said.

“Unless you talk about a shift in the whole way GSA goes about it, I don’t see much relief for the small and midsize companies,” he said.

Bring it together
Foote said GSA should drop the Alliant SB contract for small businesses. Instead, he said, Alliant should be modeled in a manner similar to the Commerce Department’s Commerce IT Solutions Next Generation contract.

Restricted to small businesses, that vehicle is further divided into three tiers to separate smaller small businesses from larger ones. The smallest companies are allowed to compete against larger companies for opportunities, but the larger ones cannot contend for opportunities reserved for smaller firms.

Alliant could take a similar approach, Foote said, by creating subdivisions under one larger umbrella contract.

If GSA doesn’t do that, STG will have to decide whether to bid as a small or large firm, Foote said. At about 1,500 employees, it could qualify as a small business. But, he added, if GSA maintains the two separate vehicles, it may be better for STG to go for the main contract.

Respect the team players
As the Alliant proposal stands, GSA will only consider prime contractors as it decides to which companies the agency will award contracts. Rosanne Satterfield, senior vice president for GSA customer relations at ITS, said GSA should also consider the performance records of
subcontractors on a prime contractor’s team.

“When we established our relationship with GSA, we were a $5 million company,” Satterfield said. “Now we’re a $100 million company. That is largely due to our success with our partners.”

GSA officials are listening to the pleas of midsize firms. Several company executives said John Johnson, assistant commissioner of service development and delivery at GSA and leader of the Alliant team, has started a productive conversation.

“I have to applaud John and his folks for taking medium-sized businesses seriously,” said Valerie Perlowitz, president and chief executive officer of Reliable Integration Services. “The problem they’re going to face is hundreds, if not thousands, of proposals are going to come across their desk.”

How big is midsize?

General Services Administration officials want to hear from midsize businesses about the Alliant contract. GSA needs answers to four questions:

How should midsize businesses be defined?

How much public interest exists for restricting a portion of Alliant to midsize
companies?

Alliant is not divided into multiple functional areas as currently envisioned. How does that affect midsize companies’ ability to compete?

What do midsize companies think of the evaluation criteria that GSA has proposed to use?
Comments are due by March 23.